Union Budget 2017 Details Updates

Finance Minister Arun Jaitley turned the tables today by capping donations to political parties. He reduced the limit of individual donation to political parties from Rs 20,000 to Rs 2,000 per person. Jaitley claims that this would check influx of black money into the political system, which is true to some extent.

How Capped Donation will Restrict Political Parties?

  • Political parties cannot take more than Rs 2,000 as cash, in the name of donations.
  • All political parties will have to file I-T (Income Tax) returns for donations received by the public.
  • One cannot exchange more than Rs 3 lakhs in cash.
  • All donations to political parties will be offered via cheques and digital means (e-wallets, card transactions, etc).
  • People who wish to donate large sums will have to seek RBI issued bonds for this purpose.

The Catch?

Over the years, political parties have mastered the art of converting black money to white money. This is evident in states like Bihar and Uttar Pradesh where regional parties like BSP and SP claim to build large parks and public places with the donations received by the public.

  • Politicians can Surpass the Limitation by Increasing their List of Supporters.

While this is true that they can try increasing the number of supporters, but then it isn’t possible when one has to exchange 20-30 crores in cash.

For instance, if they file a return stating that they’ve received Rs 200,000,000 (20 Crores), this means they’ve received this amount from 1,000,000 people, which would look shady.

  • RBI will be able to keep an Eye on Political Funds.

For bigger funds, one needs to look up to RBI. This way, the RBI can keep an eye on the income and expenditures of the political parties. This would ensure the secrecy of donors, but one can always file an RTI requesting RBI to publicize the amount of funds being allotted to different political parties. This is an innovative method for the government to keep tabs on flow of funds during elections.

But, given the opaque nature of political parties, leaders and contributors, it’ll be too early to predict the outcome of this cause. For now, we just have to wait for the election results in five states to determine the effect of political donations on election campaigning.

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